Is a 15-Year Mortgage Better Than a 30-Year Mortgage? (The LA Cost Analysis)

In most parts of the country, the debate between a 15-year and a 30-year mortgage is a matter of preference. In Los Angeles, where the median home price hovers near $1 million, it is a matter of survival.

The allure of the 15-year mortgage is strong: You get a lower interest rate, you build equity twice as fast, and you become debt-free in half the time. But in a high-cost market like LA, that accelerated timeline comes with a punishing monthly price tag.

Is the massive interest saving worth the cash flow squeeze? Let’s run the numbers on a typical Los Angeles home purchase to see the real-world difference.

The Scenario: Buying a Home in LA

To make this comparison fair, let’s use a realistic scenario for a starter single-family home or a nice condo in Los Angeles County.

• Purchase Price: $900,000
• Down Payment (20%): $180,000
• Loan Amount: $720,000

Note: We are using hypothetical interest rates typical of a standard market spread. Rates fluctuate daily, but the gap between 15-year and 30-year products usually remains consistent.

Option A: The 30-Year Fixed Mortgage

The Standard Choice

• Interest Rate: 6.5%
• Loan Term: 30 Years

The Numbers:

• Monthly Principal & Interest: $4,551
• Total Interest Paid Over 30 Years: $918,300
• Total Cost of Loan: $1,638,300

The Reality: This is the path of least resistance. The payment is lower, giving you breathing room for LA’s high cost of living, property taxes, and lifestyle. However, look at that interest number. Over 30 years, you are paying more in interest ($918k) than you borrowed ($720k). You are essentially buying the house twice.

Option B: The 15-Year Fixed Mortgage

The Aggressive Choice

• Interest Rate: 5.75% (15-year rates are typically lower)
• Loan Term: 15 Years

The Numbers:

• Monthly Principal & Interest: $5,978
• Total Interest Paid Over 15 Years: $356,000
• Total Cost of Loan: $1,076,000

The Reality: The savings are staggering. By choosing the 15-year loan, you save $562,300 in interest. That is half a million dollars that stays in your pocket rather than going to the bank. Plus, you own the home free and clear in a decade and a half.

The "LA Problem": The Monthly Gap

Here is where the rubber meets the road.

To unlock those massive savings, you have to pay an extra $1,427 per month.

In a cheaper market, the difference might only be $400 or $500. But on a $720,000 loan, the gap is the price of a luxury car lease or a child’s private school tuition.

Why the 30-Year Usually Wins in Los Angeles

For most Angelenos, the 30-year mortgage is the safer bet, even if it costs more in the long run. Here is why:

1. Flexibility is King: If you lose your job or have a medical emergency, you are stuck with that higher 15-year payment. With a 30-year loan, you have a lower mandatory obligation.
2. The "DIY" 15-Year Plan: You can take a 30-year loan but pay it like a 15-year loan. If you have a great month, pay the extra $1,400 toward principal. If money is tight, just pay the minimum. You get the benefit of early payoff without the contractual obligation.
3. Opportunity Cost: That extra $1,427/month could be invested elsewhere. If you put that money into the S&P 500 and earned an average 8% return, you might end up with more wealth than you would save by paying off the 5.75% mortgage debt.

When Should You Choose the 15-Year?

The 15-year mortgage makes sense in LA if:

• You are a High Earner: The extra $1,400/month doesn't impact your lifestyle or emergency savings.
• You are Near Retirement: You are 50 years old and want the house paid off by the time you turn 65.
• You Lack Discipline: If you know you won't invest the difference or make extra payments voluntarily, the 15-year loan forces you to build wealth.

The Verdict

In Los Angeles, cash flow is usually the biggest hurdle to homeownership. While the 15-year mortgage looks better on a spreadsheet, the 30-year mortgage offers the safety margin most buyers need.

Our Advice: Lock in the 30-year fixed rate to keep your required payment low. Then, whenever possible, round up your payments to attack the principal. You can hack your way to a 20-year payoff without signing your life away to a massive monthly bill.